Spain and Belgium warn of threat to single market after German stimulus

Spain and Belgium have issued warnings over the consequences of Germany’s huge fiscal stimulus package for the EU’s single market as the bloc tries to find a unified response to soaring oil prices ‘energy.

Germany’s announcement of a €200 billion fiscal stimulus package last week prompted other EU member states to warn of unfair distortions of competition if some states, in particular those with deep pockets are pursuing significant support measures that help their businesses.

Spanish Prime Minister Pedro Sánchez told a German newspaper on Wednesday that the single market must not be allowed to “break apart” and that while Germany’s decision was “justified”, it was important to “preserve a balance to ensure fair competition across the EU. .

“Such imbalances in budgetary expenditure are dangerous” and risk “degrading the European single market because everyone does what they want”, Belgian Prime Minister Alexander De Croo said in a separate interview.

Speaking to the Frankfurter Allgemeine Zeitung before meeting his German counterpart Olaf Scholz, Sánchez said Germany’s decision was understandable given its dependence on Russian energy. But in a joint press conference with Scholz on Wednesday evening, the Spanish leader said: “We also need answers at European level to defend something very important: equal opportunities.”

Belgian Prime Minister Alexander De Croo said Germany’s decision risked “deteriorating the European single market because everyone does what they want” © Stephanie Lecocq/EPA-EFE/Shutterstock

Sánchez is closely aligned with the German chancellor on other energy issues, including the need for more cross-border gas and electricity connections.

The warnings echoed strong criticism from Italian Prime Minister Mario Draghi and Hungarian leader Viktor Orbán. They come as the European Commission tries to bring EU capitals together to take joint action to support businesses and consumers suffering from high energy prices.

During the press conference with his Spanish counterpart, Scholz defended the German initiative. “It’s just another support package. Spain has been offering support for some time, France has always done so, the Netherlands have just announced another program. . . Britain too,” he said. “It is a program that we have planned to carry out over three years and it is adapted to the size of the German economy. Every country does it and every country can do it.

Commission President Ursula von der Leyen told the European Parliament on Wednesday: “We need to protect the fundamentals of our economy, and in particular our single market.”

Asked about the impact of the German package on the EU single market, EU competition chief Margrethe Vestager said it was too early to draw conclusions. “We will be keeping a very close eye – the integrity of the single market is absolutely essential,” she told the FT on Wednesday.

Vestager said the commission aimed to present proposals this month to expand its special crisis framework for state aid. The intention is to expedite requests from Member States wishing to channel funds to private companies. The aim, she said, would be to extend the special rules for another year until the end of 2023.

Von der Leyen was speaking ahead of an informal EU summit in Prague on Friday where member states will discuss ways to limit punitive increases in energy prices. A growing number of countries have supported the idea of ​​capping gas prices, which play a major role in driving the cost of electricity given the design of EU electricity markets .

Some diplomats have detected growing momentum behind a model used in Spain and Portugal in which gas prices are capped.

Von der Leyen said such a measure would be “a first step on the road to structural reform of the electricity market”, which the commission promised to tackle early next year.

A senior EU diplomat said capping the price of gas used for electricity “is not a valid model for many or even most member states”, while several other diplomats and politicians fear that ‘Such a decision would only risk increasing gas consumption by lowering prices at the same time. while European supplies are very tight.

Commission figures show that gas consumption in Spain increased by 10.9% in June, the month after its price cap was introduced, compared to its five-year average, despite the Spanish government said this was also due to a decline in hydroelectricity over the summer. Drought.

France has indicated its support for the “Iberian model”, from which it has benefited by importing cheaper electricity from Spain.

Sánchez, however, took aim at France on Wednesday for frustrating Madrid’s ambitions to build a new gas pipeline project, known as MidCat, across the Pyrenees to its northern neighbour.

Sánchez recalled that French President Emmanuel Macron made commitments on electricity connections in 2018 and said: “We call on the French government to fulfill its obligations now”.

Scholz said at the press conference that “I explicitly support” MidCat, adding, “We don’t feel like it’s been ruled out.”

James R. Rhodes